Each week, the Financial Post revisits CBC’s previous week’s episode of Dragons’ Den. Mary Teresa Bitti captures what the cameras didn’t and in the process provides a case study for readers, zeroing in on what pitchers and dragons were thinking and what the challenges for the deal are going forward.

The pitch Hongwei Liu, 21, and Desmond Choi, 20, were among the next generation of entrepreneurs in the student edition of Dragons’ Den. And the founders of MappedIn, a tech startup did not disappoint.

In the summer of 2010, Mr. Liu was an electrical engineering student at the University of Waterloo just coming off a work term with Research in Motion, when he applied to live at the university’s Velocity Incubator residence. While there, he conceived the idea for MappedIn and he and house/team mates began to develop the technology. The core founders are still together and Mr. Liu works full time on the company from its a development office in Kitchener-Waterloo’s Communitech Hub, a shared office space for startups, and its corporate downtown Toronto office.

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The concept is simple: Apply Google maps to indoor navigation, while allowing for marketing and analytics. The end user — the shopper walking through a mall, for example — uses an interactive touch screen directory or a mobile application to search for a product or store and is quickly shown where it is. They are also shown a profile of the retailer, what’s on sale and other interesting items to check along the way. The service is cost effective for venues to offer tenants and visitors because they are already paying for static directories.

As for the business model, venues pay a one-time installation fee plus a monthly subscription for service that includes venue level analytics: traffic patterns, consumer interest, trends and more. Venues can generate additional revenue through third-party advertising on the platform.

The latest version of the hardware, designed and assembled with a local manufacturer, has a double-sided 55-inch touch screen on one side and a regular TV panel on the other. “Someone walking up will be able to use it to find what they are looking for and on the other side, they will be able to view a premium advertiser,” Mr. Liu said.

“The trend when it comes to startups these days is for these high-growth user acquisition plays that shoot up overnight like Pinterest or Facebook. The nature of our business is slower moving. We are building one venue at a time,” said Mr. Liu, who is focused on the long term. The first venue, Conestoga Mall, signed on in September 2011, a week before MappedIn received its first round of angel funding.

When they appeared on the show, MappedIn had recurring monthly revenue of $10,000 and gross revenues of about $60,000. “We went on the Den because we really wanted the industry knowledge, networks and connections the dragons have to help take this to the next level,” Mr. Liu said.

“The greatest challenge is sales and marketing, getting this in front of the right people, in front of the grey hairs who sit on big boards and don’t want to deal with new startups.”

The deal MappedIn asked for $150,000 for a 10% equity stake. The partners accepted an offer from Bruce Croxon, Kevin O’Leary and Jim Treliving for $375,000 for 25% of the business.

“At the time, we were deep into discussions with Esri Canada, the industry standard in geographical information systems, and we are now partners,” Mr. Liu said. “The deal was taking too long so we focused on Bruce, who was the most responsive.” After talking it over with his partners in Round13, which invests in tech startups, Mr. Croxon decided MappedIn was too early stage but left the door open. Meantime, MappedIn has added six clients, including the City of Waterloo, which will be rolling out a citywide mobile application.

A dragon’s point of view “I was motivated because it is a digital offering and it had good early traction. Although they are off to a good start, it’s still a bit early for us. As well, the space is more crowded than we first thought,” Mr. Croxon said.

“On the other side, they are in the right place at the right time because the technology exists to make people’s visits to the mall a more pleasurable and efficient experience. They need to sign up 10 more malls and schools real quick and then come back and see us. There is an existing competitor in the marketplace. Their advantage will be in the back end and how well they handle the direct marketing part. We need to see some evidence of that. I think they will get there.”

An expert’s opinion Thomas Hellmann, a professor at UBC’s Sauder School of Business, said the real opportunity for MappedIn lies in mobile, and moving beyond shopping malls. “If it’s a mall-only business it’s a nice niche but it will have to out-compete existing directory providers. There isn’t much proprietary technology here. When the incumbents wake they will be in a fight. I’m looking for something that is game-changing. I can imagine amusement parks, sporting arenas. If you were to go to Disneyland this could allow a parent to ask questions: Is this appropriate for a 12-year-old? How long are the wait lines? It’s a real opportunity to offer a value-add. Sports arenas would benefit from knowing more about the behaviour of their fans — it’s a new level of interaction. The key is to think more broadly.”

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